You On Demand: Smartphone Deal With Huawei, Shares Soar

By Shuli Ren

You On Demand (YOD) announced its You Cinema app will be pre-loaded onto Huawei’s Huawei Mate smartphones.

Huawei Mate smartphones are not on sale in China yet, but shares in the Chinese pay-per-view video-on-demand soared 25% mid-day.

Why the outsized share price reaction, apart from that it is a tiny stock and therefore more volatile? Jay Srivatsa at Chardan Capital Markets breaks it down for us:

YOD could begin to receive a monthly per handset royalty upon sales of handsets as well as receive transaction fees upon download of its movies via its app by the consumer starting in December 2013.

While initial revenues could be minimal, we believe success of this handset could prompt Huawei to include YOD’s service in more high end phones and more importantly, could also motivate other handset manufacturers to include the movie feature in their offerings.

As the only pure play provider of VOD content in China, we believe YOD remains ideally positioned to benefit from this transition of movie and TV content from traditional viewing devices i.e. TV and PC to the newer mobile devices such as the smartphones and tablets.

The analyst has a Buy rating with a $6 price target. YOU last traded at $2.84.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.